The full horror of this decision is not that NASA is 'engaging the Islamic world'. If anything, that's the least controversial part of the deal.
The problem is that NASA is folding back from space travel. NASA's goals are now talking to schoolchildren about space, engaging other nations in space research, talking to Muslims about space. Nothing about these things is actually bad per se – but the thing that's key here is that none of these goals are about actually going to space.
And this is fairly reasonable.
What could NASA – given its current budget and the state of the economy – accomplish in space right now?
Of course, it would be possible to go to the moon. But unless a quality jump occurs in the size and capacity of carriers, a permanent moon settlement is not currently in the cards. All that we could do at the current level would be to send a handful of astronauts, have them hop about on the surface, conduct some experiments and go home. The scientific benefit of sending such astronauts is very limited – as far as I understand, there's very little they could do there that a moon rover of some kind could not do better and cheaper.
Every kind of major accomplishment – not just a shiny mission for the cameras, a major accomplishment – bigger lifters, a moonbase, a Mars shot, anything of this kind requires money and political will. The technology for these things is not outside the reach of humanity. Blueprints and design studies for lifters that can heft 500 tons into orbit at once existed since the 1960's. But right now, the will isn't there and we all know it.
Now I am all for private space travel. Private space travel is going to cut lifter prices of orbital lift and rocket engines, and possibly enable private moonshots at some point as the prices fall due to competition. But we're not talking about the future of space travel in general here – we're talking about NASA.
It seems to me that this new statement by the NASA director is a portent – not of some reconciliatory moves towards Muslim nations, but of NASA accepting a 'caretaker' status and giving up, if temporarily, its role as a leader in actual space travel.